The FINANCIAL -- “To be honest, I am tired of fighting the Government for 16 years now and on almost the same issues,” Fady Asly, newly re-elected Chairman of ICC-Georgia, the largest business network, told The FINANCIAL. Mr. Asly feels that the time has come to fix the business climate through a total reshuffle of the Tax Code. This should attract investments and give a new breath of life to the Georgian economy.
“I have thought a lot in the past month about quitting my position as Chairman of ICC-Georgia and focusing on other goals; however, constant calls for help from various distressed members in recent times have convinced me of the necessity to secure our members and protect them from harassment and harm; unfortunately very few people want to play this role considering that fighting for our members does result in spoiling personal relations with the Government and surely impacts on one’s personal business activities.”
“As you well remember, in 2003 Georgia became a failed state unable to honour its debts and with an empty budget, corruption and criminality were rampant and doing business was a daily challenge; after the Rose Revolution the Government succeeded in collecting taxes, filling the budget and eradicating corruption, turning Georgia into one of the safest countries in the world and putting Georgia on the map as one of the most attractive countries for business and investment.
However, with the establishment of the Partnership Fund after the 2008 August war and the decision of the Government to get involved in business, the investment and business climates degraded sensibly as the Government started competing with the private sector and in many instances taking over major businesses by hook or by crook; this became one of the darkest periods for business in Georgia.
With the election of a new ruling majority in October 2012 the new government promised to stop the harassment of businesses and to ensure property rights. Unfortunately, the diversity of ideologies within the new government has negatively affected the business climate to a great extent.
The Government does not understand that in order to develop, businesses require legislative and political stability as well as visibility and predictability; unfortunately, businesses are faced with a multitude of new legislations, some of them very business unfriendly, in addition the Government is unwilling to protect the properties of several foreign investors.
The Revenue Service is hitting businesses hard and is freezing bank accounts to apply pressure so that businesses pay arbitrary penalties to fill the budget.
All those happenings are very negatively affecting the business environment as a matter of fact we do not feel confidant in the future and nor are we feeling brave enough to encourage any foreign investor to invest in Georgia as long as he can become a soft target for harassment.
As for the economy, it has been stalling since July 2012 and the relatively encouraging figures in GDP growth of the first quarter of 2014 are due to large government spending in the last quarter of 2013 and is surely not due to a growth in private sector activities and therefore is not a creator of jobs; the 2.7% GDP growth in April reflects much better the real shape of the Georgian economy; in addition the Consumer Confidence Index was in free fall from December 2013 till March 2014 with an insignificant improvement in April.
In general and bar very few industries, the economic landscape is very gloomy and we do not foresee any sensible improvement in the near future,” Asly said.
Recently ICC Tax Commission started working to prune the Tax Code from all the dead branches and lethal articles that are killers to business and a liability to the investment climate. The deadline for this commission to complete the work is mid-August at which stage ICC will submit its version of the Tax Code to Parliament and to the Government for discussion.
“We have a few major priorities for the coming two years; the most important one is to have some lethal provisions in the Tax Code totally deleted,” Asly told The FINANCIAL. “Unfortunately, the Tax Code gives the Revenue Service full power to paralyze businesses and push them to bankruptcy; those provisions have been used by governments in the past and are still being used now to get rid of one business or another for various reasons; the tax authorities can freeze in all legality a company’s bank accounts anytime they decide that this company owes money to the budget; freezing bank accounts means that the company cannot pay employees’ salaries, bills or carry on their business activities; this is a death penalty that is being used and abused by the Government in all legality and this surely needs to stop; we will be fighting with all our resources to delete such lethal provisions in the Tax Code and in the Tax Regulations,” he added.
Another issue that ICC will be focusing on very strongly is to push the Government to protect property rights. “Several of our members are being prohibited by thugs from accessing their properties and the Government is doing absolutely nothing to secure the ownership. Of course we will continue fighting for all our distressed members and for any business who asks for our support,” said Asly.
Seven Board Members and three Officers of the Board were elected on 28 May 2014, at the ICC General Assembly. The role of the ICC Board is to meet monthly to manage and direct the organization and supervise the activities of various ICC commissions.
The International Chamber of Commerce is one of the world’s leading business organizations active in one hundred and thirty countries. It includes more than six million companies and twelve thousand chambers of commerce worldwide. The Georgian National Committee of the International Chamber of Commerce includes more than one hundred companies, seventeen business associations and two hundred Youth members.
“I had the honour to be re-elected Chair of the International Chamber of Commerce in Georgia almost unanimously; as a matter of fact this is the first time in sixteen years that members have voted me in with such a high rate of support and this is no doubt due to the fact that businesses are going through hard times and businesspeople feel the need to have a strong voice to make sure that messages from the business community are well heard and understood by the Government. I am of course very happy to have such a strong mandate from our members but by the same token it is a big responsibility,” said Asly.
Q. Please summarize your work as a Chairman of the ICC from the very beginning up till today. What have been the most important achievements of yours during this time, the biggest success, the most difficult period, the challenges?
A. I took over the ICC in 2008 as an empty shell, it was just a registered organization with no members; in a few years we succeeded in turning ICC-Georgia into the most inclusive and vocal business organization in the country; today ICC includes more than 100 companies, 17 organizations and 200 youth members. ICC also includes a Consultative Board that comprises 8 Ambassadors accredited to Georgia, the Heads of 3 International Financial Institutions and the Heads of 2 International Organizations.
We have 19 Commissions working on various sectors of business and economy and most importantly we have a fantastic staff without whom we wouldn’t be what we are today; all in all there are more than 100 people actively involved in ICC work in Georgia, all of them bringing their contribution to the betterment of the business and investment climates in the country.
We had many successes over the years such as amending business-unfriendly legislation, or organizing very high profile conferences, or bringing to Georgia very wealthy investors, or of course solving the problems of our distressed members, however, I consider that the establishment of ICC-Youth is by far the most successful achievement of our organization.
ICC-Youth is a sub-organization under ICC-Georgia that includes about 200 young Georgians between the ages of 18 to 25. We train them on best business practices, business ethics and other business issues that they do not learn at university. We also organize for them meetings with our CEOs so that they understand what the keys to success are and that dreams really can come true. We also secure internships for them and of course this is very important since when they go on internships they increase their chances of finding a permanent job within the same enterprise; you have no idea what a success the ICC-Youth project has become and how bright and committed those young people are.
Q. In our previous conversation we discussed the issue of the DCFTA. You said that implementing more than 300 regulations in a very short period of time would create a serious challenge for businesses that need time to adopt the regulations of DCFTA, which enables Georgia to apply them over the years. How has the situation changed so far? What are the current challenges?
A. The Association Agreement with the EU and the DCFTA under it are a very important political step and decision for Georgia since finally Georgia will have decided which way it will be heading in the future and of course the choice is Europe.
The DCFTA will bring many benefits to the Georgian economic and social development in the long term but we have to understand and accept the fact that there will be a very heavy compliance cost to be paid by the economy in the short term and that’s why it is very important to absorb and digest the 300 new regulations as slowly as possible so it doesn’t create a shock to the economy.
It appears that the Government understands the issue and the initial frenzy regarding a quick implementation of the regulations have been tempered somehow at this stage.
Q. Could you please discuss the crisis in Ukraine and its effect on Georgia as well as relationship considerations with Georgia’s neighbours? And can you please analyse the economic and political sphere in Georgia in regard to the reality considering the variety of different expectations that are being felt?
A. The crisis in Ukraine surely has a direct impact on Georgia since it affects the volumes of exports from Georgia to Ukraine and this is definitely having a very negative effect on the economy. In addition to that there is a direct impact on foreign investors who view Georgia as part of a broader unstable region neighbouring Russia and this of course influences their decision to invest in Georgia, a country that some of them could perceive as being somehow volatile during this period.
Georgia has very good relations with neighbouring Turkey, Armenia and Azerbaijan, we would like however to see those neighbouring markets open their borders to Georgian products and produce and fully implement the signed free trade agreements without creating non tariff barriers; unless this fully happens, mentioning that Georgia has 400 million consumers at the grab of a hand will remain nothing more than a myth.